2004 (2) TMI 485 - Commissioner - Customs

Summary

Issues:
1. Valuation of imported goods under Customs Valuation Rules, 1988.
2. Relationship between payment of fees/royalty and imported goods price.
3. Applicability of Rule 9 of Customs Valuation Rules, 1988.
4. Arms-length transaction and influence on import price.

Issue 1: Valuation of imported goods under Customs Valuation Rules, 1988
The case involved M/s. Loctite India Pvt. Ltd. importing raw materials from Loctite Corporation, U.S.A. The department registered a case as a related party under Rule 2(2) of Customs Valuation Rules, 1988. The lower authority accepted the transaction value declared in the invoice under Rule 4 of the Customs Valuation Rules, 1988, stating that the price of goods supplied by Loctite Corporation was outside the scope of Rule 9.

Issue 2: Relationship between payment of fees/royalty and imported goods price
The importer argued that the payment of lump-sum fees and royalty under the Know-how agreement for manufacturing goods in India did not have any nexus with the raw materials imported. They contended that the agreement and payments did not establish a special relationship influencing the price of imported goods.

Issue 3: Applicability of Rule 9 of Customs Valuation Rules, 1988
The department appealed, claiming that adjustments were mandatory concerning the includibility of royalty and Technical Know-how under Rule 9 of Customs Valuation Rules, 1988. They argued that the technical information and know-how fees were for processing imported goods and manufacturing final products, thus influencing the import price.

Issue 4: Arms-length transaction and influence on import price
The Commissioner analyzed the case, finding that the relationship created by the agreement did not influence the price of components or depress their value. The Commissioner noted that the importer was not obligated to procure raw materials solely from the foreign collaborator. The judgment cited the case of M/s. Balsara Extrusions, emphasizing that the prices of imported and supplied goods were at arms length, without any evidence of extra commercial reduction in import prices. It was concluded that no evidence showed the import price was influenced by any extra commercial consideration, affirming the lower authority's decision.

In conclusion, the judgment upheld the lower authority's decision, stating that there was no evidence of the import price being influenced by any extra commercial consideration. The case highlighted the importance of arms-length transactions and the lack of evidence to support the claim of non-independence between the parties or transactions not being at arms length.